Digit Ratios Are Back

Wall Street and the trading floors of similar establishments throughout the world are populated with traders who are well known for their willingness to take risks. Their expectations are high and their bonuses are large. Studies have reportedly shown that the testosterone levels in the saliva of the traders are higher than the normal average level (1).

Our old friend the 2D:4D digit ratios of the traders were also on the low side of average. So the concept is that the babies were set up to take risks before they were born and subsequently pointed at the stock exchanges and set loose to go get ‘em, tiger.

To be successful, it’s not just low risk aversion that’s required, but they do need good reasoning ability too, at least in an ideal world without poisonous derivatives. So Brañas-Garza and Rustichini decided to check this can of worms to see how risk aversion and reasoning ability interact. They selected 188 students of whom almost two thirds were women and set about measuring their fingers.

With their digit ratios established, they played lottery games to establish their risk aversion and did sets of multiple-choice papers to measure their reasoning abilities.

The first point to note is that the women’s fingers didn’t give much joy. Correlations weren’t strong enough and also were, if any, opposite to what was expected from the guys.

For the guys, low 2D:4D indicated low risk aversion. So far, so good, just like the traders and as expected. But now we have a surprise. A low digit ratio also corresponded to higher reasoning scores. Hence, we have an explanation as to how the high-risk takers survive in the trading world. The suggestion is that they process data better so the risks aren’t as risky as you and I might think – well some of the time anyway, but not lately.

So the next time you go to visit with your financial adviser, take your ruler along to check the 2D:4D ratio of his digits. If your financial adviser is a woman, you’ll need to read a different paper. This one claims that the mediating effect of reasoning ability on lack of risk aversion was absent for the female subjects.

Maybe we should look at job performance rather than the length of fingers. Or maybe it would be better to stuff our mattresses with our spare cash (if we have any left.)

  1. http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0029842

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